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Minimum Wage Compliance and the Labor Demand Curve


  • Gideon Yaniv


Contrary to the traditional analysis of the employment effects of the minimum wage setting, the author shows that if compliance is contingent upon enforcement, complying with the minimum wage law involves a leftward shift of the labor demand curve rather than an upward movement along the curve. Furthermore, the labor demand curve will shift leftward with enforcement even if enforcement is insufficient to ensure compliance, becoming vertical when the options of compliance and noncompliance are equally attractive. Hence, it is not paying the statutory minimum wage that brings about a reduction in employment down to the full-compliance level but enforcement that, if sufficiently high, induces that same reduction in employment, even if the employer is still noncomplying with the minimum wage law.

Suggested Citation

  • Gideon Yaniv, 2004. "Minimum Wage Compliance and the Labor Demand Curve," The Journal of Economic Education, Taylor & Francis Journals, vol. 35(3), pages 290-294, July.
  • Handle: RePEc:taf:jeduce:v:35:y:2004:i:3:p:290-294
    DOI: 10.3200/JECE.35.3.290-294

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    1. repec:ebl:ecbull:v:10:y:2004:i:9:p:1-7 is not listed on IDEAS
    2. Yaniv, Gideon, 2006. "On the employment effect of noncompliance with the minimum wage law," International Review of Law and Economics, Elsevier, vol. 26(4), pages 557-564, December.

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